Restaurants, hotels and other businesses in St. Helens continue to face hiring challenges. The tight labor market has been making headlines in Columbia County, the state and the nation for months.
The discussion about the difficulty of filling vacancies has been most heated in restaurants and hotels, the companies most affected by COVID-related layoffs. The Oregon Department of Employment’s quarterly survey found that 71% of vacancies were hard to fill in the spring of 2021, with an especially high proportion of those hard-to-fill vacancies for maids, housekeeping, and cooks.
The recent starting salary increases and other perks have helped attract young people into working life.
Last spring, the hotel and restaurant industry cut almost 95,000 jobs, around half of all jobs in the industry. By August 2021, the industry had resumed around 63% of those lost jobs. However, this leaves the industry behind by around 35,000 jobs. How is it possible that the industry is struggling to fill vacancies when we’ve moved more than 30,000 jobs from the previous high?
To answer this question, we tracked the pre-COVID-19 pre-COVID-19 cohort (employed in the industry in the first quarter of 2020) last year using wage records and unemployment insurance (UI) applications. When an Oregon company reported an employee’s payroll or an employee was entitled to UI in Oregon, that employee would appear in our records. Unfortunately, we do not know anything about those workers who have left working life (retired, going back to school, etc.) or who have moved abroad. Let’s take a look at what happened to workers in the industry hardest hit by COVID a year after the first layoffs from COVID.
Before the pandemic began, Oregon had 181,712 workers whose highest-income industry was lodging and catering services. In the spring of 2021, just one year later, only around 89,800 (~ 49%) were employed in an accommodation and restaurant business in Oregon. To get a context of what customer loyalty looks like in a more typical year, the cohort of accommodation and catering services was examined in the first quarter of 2018. One year later, around 62% of this cohort remained employed in a restaurant or hotel in 2018, a significantly higher proportion than the 49% of the cohort affected by COVID. Where did these workers go?
More than 20% (~ 37,000) of the hotel and restaurant workers who remained employed in Oregon relocated their highest-income industry to another industry. In other words: at least one in five employees has left the hotel and restaurant industry and moved to another sector. The largest shares went into retail (5.5%); professional and business services (3.0%); Health and social assistance (3.0%); and state or local governments (2.3%). The pattern of industry relocation for these restaurant and hotel workers is not unexpected. These industries had vacancies for people with similar skills, offered higher wages, more consistent work schedules (less seasonal and better hours), and were less affected by the pandemic.
Restaurants and hotels are losing workers to other industries every year, and the relocation of the industry has increased slightly during the pandemic. In a “typical” year this industry has relatively high churn rates. This is expected as the industry offers many entry level jobs for young professionals. It is also one of the worst paid major industrial sectors. If we look back at the cohort of hotel and restaurant workers in 2018 that were not affected by the pandemic, we find that around 17.5% of this cohort had moved to another industry a year later. The effects of the pandemic led to an increase in industry relocation of around 2.5 percentage points, which is significant but not a dramatic deviation from the previous industry relocation.
This leaves about 30% of this original cohort who did not report wages in Oregon. In spring 2021, around 18,900 (10.4%) of the original pre-COVID-19 cohort were eligible for unemployment insurance. The expansion of unemployment insurance through the CARES Act and other federal laws resulted in a very large proportion of these workers being eligible for unemployment insurance. Looking back at the cohort of hotel and restaurant workers in 2018, we find that a year later only around 0.5% had applied for UI, a significant difference from the 10.4% for this COVID-affected cohort. However, it is important to put the number of workers in a UI claim in perspective. Almost twice as many workers moved to a new industry as received unemployment insurance benefits for this cohort a year after the start of the pandemic.
These dates go through March 2021; However, the extended unemployment insurance benefits expired on September 5, 2021. The wildcard for restaurants and hotels is what happened to the 10% of pre-pandemic workers who were still receiving UI benefits in the first quarter of 2021 when those benefits were at the end of the summer. If we see most of these workers returning to accommodation and catering services, the impact on labor supply could be dampened. However, if a large proportion of these employees move from UI to another industry, it would be a significant labor crisis for restaurants and hotels.
Approximately 36,000 workers remain missing (~ 19.8%). These workers no longer appear on Oregon farm wage reports or on an Oregon unemployment insurance application. These are likely people who have either moved out of the state or dropped out of work. There are many reasons someone might be out of work, including retirement, school, health concerns, childcare restrictions, discouragement, or any number of other reasons. This proportion of unrecorded workers is pretty much what we see in a more typical year. About 19.5% of the 2018 cohort of restaurant and hotel workers were either not reporting wages or were entitled to unemployment benefits in Oregon a year later.
An increasing proportion of hotel and restaurant workers moving to other industries is a serious problem for an industry rapidly seeking to reclaim jobs lost by the pandemic. It’s too early to answer, but the most important question right now is: what happened to the workers who lost their unemployment benefits in early September? If many of these workers who were entitled to unemployment benefits are reinstated in industries other than accommodation and catering, the shortage in that industry is likely to persist for the foreseeable future.
It is important to note that the industry does not solely rely on the established workforce. Many young professionals start in a restaurant or hotel. The recent starting salary increases and other perks have helped attract young people into working life. A reversal of the decade-long decline in the labor force participation of young people is exactly what the doctor ordered for an industry struggling to fill entry-level jobs.
Damon Runberg is a regional economist with the Department of Employment in Oregon. He can be reached at damon.m.runberg@oregn.gov or at 541-706-0777.
